A minority partner in a firm that developed office properties carrying the "Magnolia" brand in the Reno area says in a lawsuit that he forced the president and chief operating officer of The Magnolia Companies to resign as manager after she funneled more than $1 million to herself and business entities that she controlled.
The lawsuit filed by Investors Financial LLC headed by Mark Combs of Reno accuses Lizanne Stoever with financial mismanagement, failure to pay bank notes and construction contracts, and misuse of the assets of the company known as MBP Equity Partners 1 LLC.
Stoever's attorney, Richard L. Elmore of Hale Lane Peek Dennison and Howard, described the lawsuit as unfounded.
"She refutes in total any allegations that there has been any improper management or improper distribution of any money out of any of the business entities," Elmore said before a hearing last week.
He said the claims by Combs were based on "very bad information."
The suit was filed in March in state district court in Reno. A jury trial is scheduled for May 14. Elmore said last week the two sides have agreed to exchange information and are working cooperatively.
MBP Equity Partners 1 LLC was involved in development and ownership of Magnolia Village at Lakeside and McCarran, two new office buildings on Double R Boulevard in South Meadows and two other office buildings in South Meadows.
In the lawsuit, Investors Financial LLC seeks a return of the missing funds plus interest, business damages sustained as a result of the loss of those assets, the right to trace and recover proceeds of converted property, and special damages.
Before last week's hearing, the attorney representing Investors Financial, Sallie Armstrong of Downey Brand LLP, declined to comment.
"We do not comment on ongoing cases," Armstrong said.
In a second lawsuit filed in July, Combs makes additional allegations against Stoever.
In that lawsuit, Combs says Stoever plundered Magnolia Commons LLC, in which he and Stoever were partners. The company developed a South Meadows retail project.
In that lawsuit, Combs alleges Stoever, in her role as manager of Magnolia Commons, co-mingled funds, gave business contracts to companies she controlled, prepaid lease commissions, and took personal loans in violation of the company's operating agreement.
The lawsuit also says she neglected to pay several of the company's construction bills for the shopping center, even though it obtained a construction loan of $6.65 million in January 2004. The suit also contends she embezzled money, breached her contract and fiduciary duty and converted property for her own use.
The lawsuit further states "Stoever began transferring loan proceeds from the company to herself or to entities she owned and controlled" weeks after it received the construction loan.
Magnolia Commons LLC has no relationship with MBP Equity Partners 1 LLC.
That lawsuit further states that Stoever transferred money from the shopping center development company to pay thousands of dollars in personal expenses including American Express and other credit card bills, personal bank loans, and for personal use.
Stoever denied all of those allegations and filed a counter claim.
No court date has been set in that case.
Combs says since Stoever's resignation as manager of MBP Equity Partners 1 LLC, he has had to spend $1.560 million of personal funds to cure problems at Magnolia Commons and to keep the company current on its obligations.
Several Magnolia Commons contractors filed liens in Washoe County against the company in 2004-2006, as did more than a half dozen other contractors who worked for other companies Stoever controls. However, those liens had been cleared by June.
The lawsuit filed in March says Stoever is facing a host of other lawsuits for nonpayment of bills and possible securities fraud.
According to the lawsuit, Combs became aware of "several puzzling monetary transactions" involving companies under Stoever's control but when Combs "attempted to privately address the issues raised by Stover's mismanagement," Stoever "either could not, or would not," account for missing funds.
Stoever denies all of these allegations.
Reporter Duane Johnson also contributed to this story.
